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The Internal Revenue Service on Monday dealt another significant setback to Yahoo’s plan to spin off its $24 billion stake in Alibaba, according to The Financial Times (subscription required).

The IRS did not specifically mention the Sunnyvale, Calif., company, but said that it was concerned about spinoffs in which the new company had a minimal operating business combined with a substantially larger investment vehicle, the FT said.

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The agency’s comments come a week after Yahoo said that its request for a so-called private letter ruling had been denied by the IRS, leaving it in limbo on what to do with its 15% stake in the Chinese ecommerce group.

When the IRS notified Yahoo on Sept. 2 of its refusal to grant the requested ruling, the agency also said that it had not concluded that the proposed spinoff transaction would be taxable and therefore was not ruling adversely on the request. Following receipt of the refusal notice, however, Yahoo withdrew its request for an IRS ruling.

Yahoo’s tax counsel, Skadden, Arps, Slate, Meagher & Flom LLP, said the IRS’ decision would not affect its ability to render an opinion that the currently proposed spinoff would satisfy all of the requirements for tax-free treatment.

“Work proceeds on the pending … spinoff plan,” Yahoo said in a Securities and Exchange Commission filing last week. “Yahoo’s board of directors will continue to carefully consider the company’s options, including proceeding with the spinoff transaction on the basis of an opinion of counsel.”

In January, Yahoo announced a plan for a spinoff of all of Yahoo’s remaining holdings in Alibaba into a newly formed independent registered investment company to be named Aabaco. Shares of Aabaco would be distributed pro rata to Yahoo stockholders.

In July, Aabaco filed its initial registration statement with the SEC. Upon completion of the planned transaction, Aabaco would own, directly or indirectly, all of Yahoo’s remaining 384 million Alibaba shares. It would also house Yahoo Small Business, an operating business of Yahoo that would be renamed Aabaco Small Business.